Covivio has raised its full-year earnings guidance due to better-than-expected growth in its hotels division and stated it will continue to focus on asset management work within the division.
The European investment and development company said that due to better-than-expected growth in hotels, it has raised its 2023 adjusted earnings guidance to €420 million from €410 million.
It added that there is stronger future demand for hotels in Europe, noting that from January 2023 to June 2023, market expectations for hotel demand come 2030 increased, with France up 10 per cent, Italy up 20 per cent and Germany up 2 per cent.
Covivio noted that while demand is expected to rise, the offer is decreasing due to Airbnb regulations in big cities and the reduced pipeline of hotels under construction in Europe.
In H1 2023, the company's hotel division recorded a 20 per cent like-for-like revenue growth. For the first half of 2023, with variable leases, like-for-like revenue was up 32 per cent, benefiting from refurbishments carried out in 2019 and a high exposure to the Paris hotels market. With operating properties, in H1 2023, like-for-like revenue was up 54 per cent due to a recovery in Germany and a strong increase in France. With fixed leases, there was like-for-like revenue growth of 10 per cent.
The group’s share of revenue for European hotels for the first half of 2023 was €65.8 million, up from H1 2022’s €53.4 million. This was a 20.3 per cent like-for-like increase, compared to the 5.3 per cent increase and 3.8 per cent increase in European offices and Germany residential respectively.
What they said
Paul Arkwright, chief financial officer at Covivio said: “Covivio will benefit from trends such as higher demand and decreasing offer with high indexation on fixed leases, growth expected in variable revenues and new asset management opportunities. Asset management in hotels is a boost to our performance and we continue to work on further asset management action.
He added: “With hotels, the momentum is positive, the increase in average daily rates and revpar is impressive and occupancy is now back to 2019 levels. We’ve signed a new 15-year lease agreement with Melia for three assets in Spain, with capital expenditure at €6 million. On this, we increased our rents by more than 30 per cent, with a 9 per cent yield on cost. In operating properties, we’ve launched €30 million of capex programs, with yield of 10 per cent expected.”